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Could these 2 health sector stocks be the Sirtex Medical Limited of tomorrow?

One of the beauties of investing in the stock market is the opportunity it presents to uncover a company which is often relatively unknown and still in the early stages of growth.

It can be hard to believe or perhaps remember, but companies such as Sirtex Medical Limited (ASX: SRX), which now boasts a $1.4 billion valuation thanks to a circa 700% rise in share price over the last decade, were once upon a time fledgling businesses.

Here are two small companies, which recently presented at the Australian Microcap Investment Conference that could be worth keeping an eye on.

IDT Australia Limited (ASX: IDT) provides highly specialised drug manufacturing to many of the top pharmaceutical companies such as Pfizer and GlaxoSmithKline. According to IDT’s management the company is at an “exciting inflection point” that will see the group grow its contract drug manufacturing business, while at the same time being able to expand its own generic drug portfolio.

With a market capitalisation of just $17 million, no debt, a replacement value on its FDA and TGA-approved manufacturing facility of $75 million, and capacity utilisation running at just 10% on a high fixed-cost base, there are a number of reasons that IDT could be worth closer inspection by investors.

Anteo Diagnostics Ltd (ASX: ADO) has developed a unique technology that has application across the diagnostics and life science industries. The technology, known as Mix&Go, binds fragile biomolecules gently yet strongly to synthetic surfaces allowing for more sensitive and affordable diagnostic tests to be performed.

The company already boasts a market capitalisation of $125 million but there could still be significant upside if Anteo successfully commercialises its product. In the near term, an agreement with a leading healthcare company should result in Anteo earning a royalty on every test performed using an instrument containing its Mix&Go technology. Management has also provided guidance that it expects to close in excess of ten deals over the next four years.

Large addressable markets

Both IDT and Anteo Diagnostics have opportunities to capture a share of markets worth billions of dollars, that of course provides no guarantee of success but it does offer a potentially long runway of growth for these two firms.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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